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In the matter of: Shree Siyaram Automations Pvt. Ltd., New Delhi v/s Beans & More Hospitality Pvt. Ltd., Delhi

    CP No.(IB)-512(ND) of 2017
    Decided On, 13 March 2018
    At, National Company Law Tribunal New Delhi
    By, THE HONOURABLE MR. R. VARADHARAJAN
    By, JUDICIAL MEMBER & THE HONOURABLE MR. V.K. SUBBURAJ
    By, TECHNICAL MEMBER
    For the Petitioner: Rakesh Kumar, Preeti Kashyap, P.K. Sachdeva, Chetna Bisht, Advocates. For the Respondent: M.K. Pandey, Advocate.


Judgment Text
1. This is a Company Petition which has been filed under the provisions of Insolvency and Bankruptcy Code, 2016 (IBC, 2016) by a Financial Creditor against the Corporate Debtor on the ground that the loan amount in a sum of Rs.90,00,000/- along with interest stands defaulted and in the circumstances this Petition seeking to invoke the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. It is averred by the Petitioner in the Petition that it is a Company incorporated under the provisions of the Companies Act, 1956 on 3rd March, 1994 having identification No. U74899DL1994PTC057697 and that it is having its registered office at 25/32,Ist Floor, East Patel Nagar, New Delhi-110008 and in the present proceedings it is being represented by Mr. Uttam Saraf, Director of the Financial Creditor. It is further averred in the application that the Corporate Debtor has been incorporated under the provisions of the Companies Act, 1956 having identification No. U55101DL2010PTC204045 and having its registered office at 57, IInd Floor, Kiran Vihar, East Delhi, Delhi-110 092. Part III of the Application contains the name and particulars of the Interim Resolution Professional proposed and the person named therein being one Mr. Prabhjit Singh Soni, Company Secretary in practice and an Insolvency Professional having registration No. IBBI/IPA-002/IP-N00065/2017-2018/10143 as a Resolution Professional with Insolvency and Bankruptcy Board of India (IBBI). Part IV of the Application contains details of the financial debt including the date of disbursement of amounts by way of loan to the Corporate Debtor and also details of payment of interest and the TDS deducted thereof by the Corporate Debtor in relation to payment of interest. Further it also discloses that interest in a sum of Rs.8,10,000/- remains unpaid as on 31.3.2016 and in relation to the period 31.3.2017, a sum of Rs.9,00,000/- is stated to be in default and as on 30.9.2017 it is further claimed that a sum of 4,95,000/- Is due and taking into consideration the principal amount as well as interest as given above, a sum of Rs.1,12,05,000/- is claimed in the aggregate as the amount in default and the due date of default is stated to be 01.04.2016. In relation to the financial transactions being by way of loan given, the Financial Creditor relies upon the letter from Corporate Debtor acknowledging the debt annexed as Annexure-L to the typed set of documents of the Petition. In order to establish that there has been actual disbursement of loan amount, a statement of bank account of Bank of Baroda has been annexed as Annexure-I, from where the loan amount was disbursed and debited of the Financial Creditor Is also annexed. In addition, the interest payment in a sum of Rs.6,62,030/- received on 6.5.2015 excluding TDS on the gross interest as well as Form 26AS along with deduction of TDS of Rs.90,000/- in relation to interest, however not paid by the Corporate Debtor has been annexed as Annexure-J and K respectively.

2. Further, in the absence of loan agreement between the Financial Creditor and the Corporate Debtor and in order to sustain the transactions of loan as between the parties, the Petitioner has also filed additional documents being the financial statements of the Corporate Debtor as well as Financial Creditor for the year ended 31.3.2015 in Vol. II as Annexure-B filed subsequently by the Financial Creditor. Further, a copy of EOGM Resolution as stated to have been passed by the respective companies have also been enclosed as Annexure-C from pages 54 to 62 of the additional set of documents filed, being Vol.II.

3. At the time of oral submissions the above EOGM Resolution as well as financial statements of both the Corporate Debtor as well as Financial Creditor were relied upon by the Ld. Counsel for Petitioner wherein it was shown that in relation to the loan transaction as between the parties, the same has been shown as such for the year ended 31.3.2015 under the head ‘‘Short Term Loan From other Parties' in the books of Corporate Debtor and correspondingly under the head 'Short Term Loans and Advances' in the books of Financial Creditor and since there has been over-whelming acknowledgement for the transactions both in the books of the Corporate Debtor as well as Financial Creditor and also supported duly by other evidences including the disbursal of loan, acknowledgement from the Corporate Debtor of the loan and the Resolution passed, all of which goes to establish that the transaction is genuine and since there is a debt which is payable and the payment of which has been defaulted on the part of the Corporate Debtor, the provisions of IBC, 2016 is applicable and in the circumstances the CIRP process should be initiated against the Corporate Debtor as prayed for in the Application.

4. Per contra Ld. Counsel for Corporate Debtor vehemently disputes the transactions per se and submits that the transaction under which sums were paid is not a loan transaction at all and since the Corporate Debtor was holding a huge land bank and in relation to the same certain payments were made by the Financial Creditor and not as a loan. In relation to the real estate industry, these transactions are usual and as such it is only reflected as loan in the financial statements as well as in the books and not otherwise and in the circumstances much credence should not be given in relation to the reflection of the transactions as loan and as sought to be established by the Financial Creditor. The acknowledgement letter dated 8.7.2014 annexed at page No.56 of the typed set of documents Vol. I to the Application is also being seriously assailed on the ground that the entire letter is forged and manipulated. In this regard, it is submitted that the address which is stated as the address of the Corporate Debtor at the relevant point of time was not the address of the Corporate Debtor at all and that it moved to the said location/address only from 14.1.2015 and prior to the said date, the Corporate Debtor was functioning at a different place and address and that the above fact is supported by the Forms filed with the Registrar of Companies by the Corporate Debtor. This, it is claimed by Ld. Counsel for the Corporate Debtor prima facie establishes that the letter is manipulated and is an after thought concocted for filing this Petition before this Tribunal. In addition, it is also submitted that the letter does not specify any terms for the loan taken as alleged. It is further submitted by Ld. Counsel for Corporate Debtor that there is no begin or end date specified in the so called acknowledgement letter which is sought to be relied upon by the Petitioner for the grant of loan and even assuming the so called acknowledgement being Annexure L taken as true, in the absence of end date no default had arisen in relation to repayment of debt and hence there is no default and in the circumstances CIRP under the provisions of Section 7 of IBC cannot be initiated. In relation to EOGM Resolutions which is sought to be relied upon by the Petitioner as alleged to have been passed in the shareholder meetings of the respective companies dated 2.6.2014 of the Corporate Debtor and 16.5.2014 of the Financial Creditor, it is contended by the Ld. Counsel for the Corporate Debtor that the same is fabricated for the purpose of this Petition and in this connection reliance is sought to be placed on the report of independent Company Secretary dated 14.12.2017, being a search report of the Corporate Debtor annexed as a document filed along with the objections and also the search report of the Financial Creditor dated 15.12.2017 again annexed with the objections and it is pointed out that as per the report, an independent professional namely a practicing Company Secretary after having caused searches to be made of the records available with the Roe of the respective companies has specifically stated that no Resolutions as required under the provisions of the Companies Act have been filed with the Roe and as are required to be complied with under Section 117(3) of the Companies Act, 2013 during the relevant period when the search was caused to be made. It is also further contended that the loan amount claimed and alleged to have been given to the Corporate Debtor by the Financial Creditor is far in excess of the respective paid up capital of the Companies involved in this litigation and that the same could not have been granted by the Financial Creditor nor it could have been availed by the Corporate Debtor without the approval of the shareholders in the EOGM by way of special Resolution and if that were so, the same should have been filed with the Roe in Form MGT-14. In the absence of the same it is contended that the existence of the loan transaction as claimed by the Financial Creditor is vehemently assailed as unsustainable and also taking into consideration the plea of the Corporate Debtor that Resolutions have been purely fabricated for the purpose of this Petition and hence the same should not be considered by this Tribunal and in fact it is a fit case for invoking Section 340 of the Cr.PC read with Section 424(4) of the Companies Act, 2013 and in relation to the same an application has also been filed by the Corporate Debtor seeking for the prosecution before this Tribunal of the Petitioner/Financial Creditor. It is also contended by Ld. Counsel for the Corporate Debtor that in Part IV of the Application, no date of default of the loan repayment has been mentioned in Form I and in the absence of debt as well as default as contained under the provisions of IBC, 2016 not being established and also taking into consideration that there is no debt instrument produced as to when the amount has become due, it does not fulfill the conditions which have been laid down under Section 3(12) of IBC, 2016 and also under Section 7 of IBC, 2016 and that taking into consideration all the above, the Petition is required to be dismissed that too with exemplary costs.

5. Ld. Counsel for Corporate Debtor also relies upon the judgment of Hon’ble Supreme Court rendered in 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited – 2017 SCC Online SC 1154' in order to buttress the arguments that unless there is a debt due and default has been committed in relation to the said financial debt which should be established, no action lies before this Tribunal under the provisions of IBC, 2016 for invoking the CIR process against the Corporate Debtor.

6. By way of rebuttal, Ld. Counsel for Petitioner submits that independent of the documents which is sought to be assailed by Ld. Counsel for the Corporate Debtor, it is evident from the records particularly from Form 26AS as well as taking Into consideration the financial statements of the Corporate Debtor for the year ended 2013-14 as well as 2014-15 wherein an amount of Rs.90 lakhs as disbursed by the Financial Creditor to the Corporate Debtor has been recognized as a short term loan from other parties including the interest and that a sum of Rs.96,62,030/- has been reflected for the year ended 2014-15 and that it is pertinent to note that the transactions took place in the year 2014 and as reflection of the same, the above said amount has been disclosed in the financial statement of the Corporate Debtor which is in fact was an acknowledgement of the liability owed to the Financial Creditor on the said date and in the circumstances the debt owed cannot be denied by the Corporate Debtor. Ld. Counsel for the Petitioner also points out to the financial statements of the Financial Creditor wherein under the head ‘short term loan/ advances’ on the assets side of the said financial statements for the year ended 2014-15, a sum of Rs.96,62,030/- is stated to be the amount due from the Corporate Debtor under the head ‘short term loan advances’ and consistently thereafter the same has been reflected in the financial statements of the Financial Creditor for the year ended 2015, 2016 as well as including interest and independent of the Resolutions passed ln EOGM and which is sought to be challenged as also the letter of acknowledgement issued in relation to the availing of loan by the Corporate Debtor, cannot dispute the loan transaction as transpired between the Financial Creditor and the Corporate Debtor. It is further pointed out that the said letter being annexed as Annexure-L was handed over by the Corporate Debtor to the Financial Creditor and it was taken to be genuine and the same cannot be assailed presently, as the Financial Creditor is protected by the Doctrine of Indoor Management and the said letter reflecting the address as given by the Corporate Debtor cannot be wished away. In relation to the term of the loan transaction, it is submitted by Ld. Counsel for Financial Creditor that even though the term of loan has not been specified however, the rate of interest has been specified at 10% and which correlate with the payment made during the first year by the Corporate Debtor to the Financial Creditor as well as for the subsequent year by way of deduction of TDS in a sum of Rs.90,000/- for interest payable Ina sum of Rs.9.00 lakhs even though the interest payment stands defaulted by the Corporate Debtor and whether it be loan repayment or interest payment in relation to which default has been committed is immaterial under IBC, 2016 as long as the Financial Creditor is able to establish that there is a default on the part of the Corporate Debtor. Taking into consideration the above submissions, Ld. Counsel for Financial Creditor represents that there is a debt being a financial debt and default has arisen, more particularly in the payment of interest in relation to the particular debt in addition to the payment of loan which is in default per se as in the absence of end date should be considered as loan repayable on demand and hence the Petition is required to be admitted under the provisions of Section 7(5) of IBC, 2016. In relation to reliance placed by Ld. Counsel for Corporate Debtor of the Hon’ble Supreme Court decision stated above namely; 'Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited - 2017 SCC Online SC 1154', Ld. Counsel for Petitioner submits that it only strengthens the case of the Financial Creditor as it has been held at paragraph 40 of the said judgement which applies with equal force to the financial creditor, as well that the defence which is sought to be put up should not be a moon shine or illusory and taking into consideration the existence of a financial debt and default which has been established as prescribed under the provisions of IBC,2016 by the Financial Creditor, onus of the Financial Creditor stands discharged fully in the light of the above submissions made and in the circumstances the petition/application should be admitted.

7. We have carefully considered the pleas of the contesting parties to this lis. For invocation of the provisions of IBC, 2016 by Financial Creditor, it is required of this Tribunal to consider, whether a financial debt is in existence and payable as between the parties and that a default has arisen on the part of Corporate Debtor In relation to the financial debt. Financial debt has been defined under clause 5(8)(a) that the money borrowed against the payment of interest is a 'financial debt. Even though Annexure L is sought to be denied by the Corporate Debtor as fabricated solely for the purpose of filing this litigation, this Tribunal is hot satisfied with the said plea, in view of overwhelming other evidences which have been placed before us to sustain the transaction of loan for the amount in a sum of Rs.90,00,000/-as well as in relation to rate of interest payable at 10% p.a. for availing the loan from the records of the Corporate Debtor Itself and even without looking beyond the said records. In this connection, it is to be seen that the financial statements of the Corporate Debtor for the year ended 31.03.2015 dearly discloses not only the amount of loan but the amount of interest payable as on 31.03.2015 being Rs.96,62,030/-. Further, the rate of interest and interest amount payable every year is also supported as rightly contended by the Ld. Counsel for the Petitioner by deduction of TDS in Form 26AS by the Corporate Debtor directly with the Income Tax Department and as filed by the Financial Creditor, over which the Financial Creditor does not have any control, and a perusal of which shows the name of the Corporate Debtor reflected therein and the amount paid I credited also disclosed to be Rs.9,00,000/- which correlates with 10/o as reflected in Annexure-L of the petitioner’s typed set and which document is sought to be assailed by the Corporate Debtor. The amount of TDS deducted is also specified there in i.e. in Form 26AS to the extent of Rs.90,000/- which is shown as deducted and deposited in favour of the Financial Creditor. These actions of the Corporate Debtor will in itself vouch for the transaction of loan and the same cannot be denied by the Corporate Debtor. It is also to be seen that non compliance with the procedural formalities by either of the parties cannot vitiate the substantive nature of transaction, being that of a loan transaction and the corporate debtor cannot be allowed to deny the substantive nature of transaction based on procedural non compliance, particularly where the loan transaction has been recognized as such in its financial statements or otherwise. Passing of necessary resolutions for obtaining the loan by a debtor company and reliance on the same for denying the transaction has been dealt with as follows by the Hon’ble HIGH COURT OF ALLAHABAD in First Appeal No.526 of 1955 decided on: 21.12.1956 IN LAKSHMI RATAN COTTON MILLS CO. LTD. VS. J.K. JUTE MILLS CO. LTD and reported in 27 Company Cases 660 (All) and to quote:

If it is found that the transaction of loan into which the creditor is entering is not barred by the charter of the Company or its Articles of Association, and could be entered into on behalf of the Company by the person negotiating it, then he is entitled to presume that all the formalities required in connection therewith have been complied with. If the transaction in question could be authorized by the passing of a resolution, such an act Is a mere formality. A bona fide creditor, in the absence of any suspicious circumstances, is entitled to presume its existence. A transaction entered into by the borrowing company under such circumstance cannot be defeated merely on the ground that no such resolution was in fact passed. The passing of such a resolution is a mere matter of Indoor or internal management and its absence, under such circumstances, cannot be used to defeat just claim of a bona fide creditor. A creditor being an outsider or a third party and an innocent stranger is entitled to proceed on the assumption of its existence; and is not expected to know what happens within the doors that are closed to him. Where the act is not ultra vires the statute or the company such a creditor would be entitled to assume the apparent or ostensible authority of the agent to be a real or genuine one. He could assume that such a person had the power to represent the company, and if he in fact advanced the money on such assumption, he would be protected by the doctrine of internal management.

8. In relation to default whether it be either of the loan or of interest is not a material criteria so far as the Financial Creditor is able to establish that the payment of Interest, being the compensation simpliciter for time value for money as laid out by the definition of a Financial Debt under IBC, 2016 is part of the bargain between the parties. Since for the interest payment to which TDS has been deducted and in relation to the payment of interest In a sum of Rs.9,00,000/- has been defaulted by the Corporate Debtor which is also not denied by the Corporate Debtor in Its objection as pointed out by Ld. Counsel for the Financial Creditor, and the said amount of default being in excess of Rs.1,00,000/- this Tribunal is of the considered view that there a Financial Debt in existence as between Financial Creditor and the Corporate Debtor and that default has arisen as amply illustrated by the documents of Corporate Debtor itself as well as by its actions, though may not be of principal amount repayment but of at least interest payment payable per annum and in the circumstances this petition/application is maintainable before this Tribunal under the provisions of Section 7 of IBC, 2016 read with other attendant provisions as applicable to a financial debt.

9. Thus taking into consideration the averments made in the application as well as the documents filed, this Tribunal is of the view that a default has been committed by t

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he ‘Corporate Debtor’ in relation to the financial facility being a loan granted falling within the definition of ‘Financial Debt’ as provided under the provisions of IBC, 2016 and the same has been established and hence calls for the initiation of CIRP as contemplated under the provisions of IBC, 2016. This Tribunal has perused Form-2 dated 30.10.2017, annexed at Annexure-G, as filed by the proposed IRP namely Mr. Prabhjit Singh Soni, Company Secretary in practice and an Insolvency Professional having registration No. IBBI/IPA--002/IP-N00065/2017-2018/10143 which prim a facie is In order, this Tribunal appoints him as the IRP to exercise all the powers and duties as enjoined on him by IBC, 2016. The IRP, inter alla shall cause the paper publication and call for the claims from the creditors and for convening the Committee of Creditors meeting within the time stipulated under IBC, 2016. 10. In view of the Application being admitted and IRP appointed as a necessary corollary, the Moratorium as provided under Section 14 of IBC, 2016 in relation to ‘Corporate Debtor’ will follow suit and the order of Moratorium shall take effect from the date of this order till the completion of CIRP, subject of course to the circumstances as provided under proviso to sub section (4) of Section 14. The management of the Corporate Debtor, in the mean while shall stand suspended taking into consideration the provisions of Section 17 of IBC, 2016 and the same shall stand vested with the IRP named herein above and all the parties including the directors and employees of the Corporate Debtor are directed to co-operate with the IRP in discharging his powers and duties as enjoined under IBC, 2016. The IRP shall keep this Tribunal abreast with the progress of CIRP by way of duly verified reports at least every month and until the time he is discharged from the capacity of IRP by this Tribunal along with the minutes of Committee of Creditors (COC) meeting convened from time to time. 11. In terms of the above, the Application stands allowed. Let a copy of this order be communicated to both the ‘Financial Creditor’ as well as the ‘Corporate Debtor’ by the Registry, as provided under the provisions of Section 9(5) of IBC, 2016 at the earliest.
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